USA Stimulus 2.0 – Key tax provisions

Paycheck Protection Program (PPP)

There have been a second tranche of PPP loan declared under the CAA but with significant changes in the current one.

Eligible borrowers include:

• Employers with less than 300 employees and
• Employers who had gross receipts in a quarter during 2020 that represents a 25% reduction from gross receipts of the entity during the corresponding quarter in 2019

Maximum loan amount has been reduced to USD 2 million from USD 10 million under the CARES Act

An earlier provision for using 60% of the PPP loan proceeds against payroll expenses remains unchanged

.. and more

Employee Retention Credit (ERC)

The CARES Act created the ERC under which an eligible employer could take a credit equal to 50% of the first USD 10,000 of qualified wages paid by it during 2020, leading to a maximum credit of USD 5,000 per employee. The CAA has changed ERC-related provisions as per the following:

• ERC has been extended to 30 June 2021 from 31 December 2020
• Credit limit of 50% and USD 10.000 per year increased to 70% and USD 10,000 per quarter
• Gross receipts threshold for eligible employer has been increased to 500 or fewer

.. and more 

Other provisions

The following provisions have also been provided under the CAA:

• New stimulus checks of USD 600 per individual taxpayer and qualifying child.
• Existing business meals deductibility rule is 100% deductible provided business food and beverages are provided by a restaurant. The rule is applicable for 2021 and 2022.
• Extension of the sick pay and paid family leave credits enacted by the Families First Coronavirus Relief Act (FFCRA) through 31 March 2021.

.. and more

Further changes may be expected in the future under the new administration, headed by Joe Biden (President), which has proposed a USD 1.9 trillion relief plan known as the American Rescue Plan.

How we can help

Grant Thornton Bharat’s US Tax team can help companies analyse the most beneficial incentive available for their US entities under stimulus package to meet their liquidity challenges during these uncertain times.